Homebuilder sentiment edges down to lowest since September

Confidence among homebuilders fell to an 11-month low in August on rising construction costs and shortages of skilled labor, a National Association of Home Builders/Wells Fargo report showed Wednesday.

The Housing Market Index decreased to 67, matching estimates, from 68 in July. The gauge of the six-month sales outlook slipped to 72, the lowest since November 2016, from 73. The current sales measure for single-family homes fell to 73 from 74, and the gauge of prospective buyer traffic declined to 49 from 51.

Homebuilder sentiment high
A worker saws a section of lumber inside a home under construction at the M/I Homes Inc. Bougainvillea Place housing development in Ellenton, Florida, U.S., on Thursday, July 6, 2017. Photographer: Ty Wright/Bloomberg

The housing market, particularly in some of the hottest markets, has shown signs of cooling as buyers are squeezed by rising mortgage rates and by home prices climbing about twice as fast as incomes. More expensive building materials, partly due to tariffs on imported lumber, have also weighed on housing. Lumber prices have cooled from a record earlier this year, but costs still remain elevated.

Even so, builders continue to report strong demand for new housing, the Washington-based group said. Tailwinds from a robust labor market and tax cuts have helped prop up sentiment as the economic expansion enters a 10th year. Government data due Thursday are forecast to show builders started more homes in July as permits rose from a nine-month low.

"The solid economic expansion and firm job market should spur demand for new single-family homes in the months ahead," NAHB Chief Economist Robert Dietz said in a statement. "Meanwhile, builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber. These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges."

The gauge in the Midwest slumped to its weakest level in almost two years as the Northeast fell to a 14-month low. The indicator advanced in the South remained unchanged in the West.

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